Japan central bank increases bond buying, yields fall sharply

TOKYO – The Bank of Japan said it would increase the amount of bonds it was planning to buy in the day’s operations on Wednesday, in its latest efforts to curb a recent surge in yields.

The market immediately reacted to the move, with the 30-year JGB yield falling 10 basis points (bps) to 1.475 percent, its lowest since Oct. 14.

The 20-year JGB yield slipped 6.5 bps points to 1.13 percent, its lowest since Oct. 19.

Investors have been testing the central bank’s resolve to pin down interest rates, sending yields on super-long ends to multi-year highs this week.

The BOJ conducted emergency bond buying operations for two straight sessions last week only to see yields keep rising.

Yields on shorter end notes also fell, with the two-year JGB yield retreating 1 bps to -0.025 percent. The five-year yield fell 2.5 bps to 0.090 percent.

The benchmark 10-year JGBs were not traded and the yield stayed at 0.250 percent, the upper limit of the BOJ’s policy band, as the bank continues daily offers to buy unlimited amounts of the bonds of the same maturity.

The BOJ offered to buy 350 billion yen ($2.36 billion)of bonds with 10- and 25-year maturities, up from 250 billion yen it had planned.

The BOJ said it would also buy 575 billion yen of bonds with 3- to 5-year maturities, up from a planned 475 billion yen, and 150 billion yen of bonds with maturities more than 25 years, up from 100 billion yen.

($1 = 148.1500 yen)